Nigeria Mortgage Refinance Company plc plans to raise up to N10 billon by issuing 15-year bonds, as part of its N140 billion medium-term note programme, to access long-term funds from the capital market for its refinancing activities.
The proposed bond is considered an impact bond as it is expected to provide the much needed funding that will engender increased mortgage lending in the Nigerian housing sector, with an expected multiplier effect on the broader economy at large.
After a review of the strength of the issuer and the merit of the bond’s structure, Global Credit Rating Company (GCR), an international recognised and fully accredited rating agency, has accorded an ‘Aaa’ crediting rating to the bond, and NMRC obtained an investment grade credit Issuer Rating of ‘BBB+.’ The rating underscores the confidence reposed on the management of NMRC, the governance and risk management structure and the credit support provided by the Federal Government of Nigeria.
The ‘AAa’ investment grade rating is an affirmation of the underlying credit strength of the bond, which is a new asset class that will diversify the portfolio of long-term investors.
In its report, the rating agency notes that the rating reflects the strength of the proposed business model, financial projections and assumptions as well as the various risk mitigating mechanisms of NMRC. In assigning the rating, the rating agency considered the strong shareholder base, strong board profile (majority of which are executive management in owner institutions) and quality of the management. The strong support enjoyed by the issuer from the Federal Government (as evident in the FGN Guarantee) and other international development agencies, including the World Bank and IFC, forms the rationale behind the bond’s rating. The proposed Series 1 Bond being issued under the Medium Term Note Programme will be utilised to refinance with full recourse, mortgage loans originated by Eligible Mortgage Lending Banks. To be eligible for refinancing, the mortgage loans must conform to NMRC’s Uniform Underwriting Standards.
NMRC’s refinancing will be secured by the mortgage lenders securing their mortgage loans as collateral for the facility, which must be at least 125 percent the value of the refinancing amount. The Notes will constitute direct, secured and unconditional obligations of the issuer and shall rank pari passu in all respects without discrimination, preference or priority.
NMRC is a private sector driven company with the public purpose of developing the primary and secondary mortgage markets by raising long-term funds from the domestic capital market as well as foreign markets that will promote accessible and affordable housing in Nigeria. NMRC obtained its operational licence from the CBN on February 18, 2014, to conduct mortgage refinancing business in Nigeria. The company has a mandate to encourage and promote home ownership by providing financial facilities to the mortgage lenders, thereby increasing the availability and affordability of mortgage loans to Nigerians